Families planning Hawaiian cruises could soon face higher costs, as the state considers new taxes on cruise ship passengers. The proposed measures, which include a per-passenger fee or an 11% tax, similar to taxes paid by hotel guests, have triggered a strong threat of legal action from the cruise industry.
Some lawmakers in Hawaii are arguing that the fee increase will ensure cruise visitors contribute their “fair share” to the state, making them equal with other tourists who pay the Transient Accommodations Tax (TAT).
Hawaii’s Transient Accommodations Tax (TAT) is a 10.25% state tax on income from short-term rentals like hotels and vacation homes. Some counties, like Oahu, add a 3% surcharge, making the total tax 13.25% in those areas.
“All we’re asking is for them is to pay their fair share,” State Rep. Adrian Tam, House Tourism Committee Chair, stated. “They are benefiting from Hawaii’s natural beauty.”
However, cruise lines are opposing the tax hike and threatening a lawsuit. Attorneys representing the cruise industry have sent a letter to Hawaii’s Attorney General and lawmakers, claiming the taxes are unconstitutional under long-standing maritime law.
They argue that federal regulations limit taxes on vessels to the cost of providing port services. The letter warns of “costly and time-consuming litigation” if the state proceeds.
Danial Farkas, Executive Vice President and General Counsel of Norwegian Cruise Line Holdings Ltd., spoke to reporters about the financial impact on passengers. He noted that guests on Norwegian Cruise Line’s inter-island Pride of America cruise already pay around $100 in existing fees and excise taxes per person for a five-day voyage, with around $20 per person per port entry.
According to some, the proposed new taxes could double this amount.
“And what that means is that for a family of five, such as myself, that’s an extra $500 to the price of a ticket,” Farkas warned. “And it is going to make very, very quickly the cost of a cruise simply unaffordable.”
Farkas also suggested that if the costs become too high, cruise lines could simply pack up and leave. “It picks up and moves, it’s got propellers, it’s got rudders, and we can move it wherever we want,” Farkas stated.
This development is especially relevant to Norwegian Cruise Line, which has the only U.S. flagged cruise ship, Pride of America, which operates year-round sailings around Hawaii. It’s the only ship which offers cruises that both start and end in the state.
With both the House and Senate in Hawaii having passed their own versions of the cruise passenger tax bills, the final decision on how much more tourists will be taxed will be made in negotiations between the House and Senate in a conference committee.
Until then, future cruise passengers to Hawaii will have to wait to see if their vacation is about to get more expensive to the 50th state.
